In a letter to a special committee of Loral Space & Communication’s board of directors, J. Kevin Ciavarra, general counsel at Dallas-based Highland, which owns more than 5% of Loral, calls the terms of a proposed $300 million sale of convertible perpetual preferred stock to MHR – Loral’s largest shareholder – “a magnet for private and governmental scrutiny and stockholder litigation.” Highland has, in turn, offered to purchase the shares on terms it calls more favorable.

“In this transaction, it appears that, as Loral’s largest stockholder, MHR is using its insider position to enrich itself to the detriment of Loral and other stockholders,” Ciavarra wrote. He went on to say the deal “reeks of self-dealing, self-interest and is contrary to established market principles of fairness. That [the special committee] have associate yourselves with this questionable transaction by approving it under a cloak of ignorance would make you equally culpable.”

According to Highland, the coupon, conversion price and perpetual nature of the stock sale are contrary to typical market terms. The firm also decries the awarding of an additional board seat to MHR, and accuses Loral of failing to offer the securities to other large shareholders.

Highland is offering to underwrite the $300 million deal with a lower coupon, higher conversion price or both, and said it would offer shares to all large Loral shareholders, except MHR.